Nutrien Ltd T.NTR

TD 2 (Target Raised)

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Raises their target to US$69.00. GLTA

EARNINGS UPDATE

Q1/24 EBITDA ABOVE EXPECTATIONS; 2024 GUIDANCE MAINTAINED

THE TD COWEN INSIGHT

Q1/24 results were above expectations, while NTR's primary 2024 guidance ranges were maintained. We came away from Q1/24's release with increased confidence in NTR's 2024 outlook, including in terms of expectations for potash and nitrogen sales volumes, and Retail's results. Further, despite some recent volatility, we see potential for various nutrient prices to improve as 2024 progresses.

Event:

NTR reported Q1/24 adjusted EBITDA that was above expectations. Meanwhile, NTR reaffirmed its 2024 fertilizer sales volume and Retail adjusted EBITDA guidance ranges, as market conditions and the company's operational performance have progressed in line with NTR's prior expectations year-to-date.

NTR noted that it has initiated a process to divest its Retail assets in Argentina, Chile, and Uruguay (accounts for approximately 2% of NTR's expected 2024 Retail segment adjusted EBITDA) to focus on its core Retail businesses and improve the quality of its earnings and cash flow profile. We do not expect proceeds to be material in the context of NTR.

Impact: SLIGHTLY POSITIVE

Q1/24 adjusted EBITDA was $1,055mm vs. consensus/TD at $979mm/$965mm.

Adjusted EPS was $0.46 vs. consensus/TD at $0.38/$0.40.

Outlook: NTR expects 2024 Potash sales volumes in the range of 13.0mm–13.8mm tonnes, with volumes expected to be evenly split between H1/24 and H2/24. Meanwhile, NTR expects Nitrogen sales volumes of 10.6mm–11.2mm tonnes, supported by higher y/y North American and Trinidad plant operating rates, and increased y/y sales of upgraded products (i.e., urea and nitrogen solutions).

For Potash, management noted strong North American demand, and expects distributors to end the spring season with limited potash inventory, which would support healthy demand in H2/24. Brazil Potash demand has improved in Q2/24, and the region's benchmark price has increased approximately $30/t over the last three months. Meanwhile, potash imports to China remained strong in Q1/24, although NTR expects imports to decline y/y on a full-year 2024 basis (due to a tough prior year comp).

While global nitrogen markets have fluctuated in 2024 (reflects seasonal buying pattens, production outages, and uncertainty over Chinese urea export restrictions and India’s urea import requirements), management noted that the U.S. nitrogen market remains relatively tight (particularly for ammonia and UAN).

Updated Estimates: Our consolidated estimates have increased slightly. Our target price has increased to $69.00 (from $67.00).